nep-tra New Economics Papers
on Transition Economics
Issue of 2006‒01‒24
37 papers chosen by
Tono Sanchez
Universitat de Valencia

  1. Does Privatization Hurt Workers? Lessons from Comprehensive Manufacturing Firm Panel Data in Hungary, Romania, Russia, and Ukraine By J. David Brown; John S. Earle; Almos Telegdy
  2. Two decades of reform : the changing organization dynamics of Chinese industrial firms By Nabeshima, Kaoru; Yusuf, Shahid
  3. China?s Emerging Tax Regime: Local Tax Farming and Central Tax Bureaucracy By Zhu, Z.; Krug, B.
  4. How much of the Macroeconomic Variation in Eastern Europe is Attributable to External Shocks? By Bartosz Mackowiak
  5. CEO Turnover, Firm Performance and Enterprise Reform in China: Evidence from New Micro Data By Takao Kato; Cheryl Long
  6. What%u2019s So Special about China%u2019s Exports? By Dani Rodrik
  7. Emissions Trading to Improve Air Quality in an Industrial City in the People's Republic of China By Krupnick, Alan; Bell, Ruth; Morgenstern, Richard; Anderson, Robert; Abegunawardena, Piya; Schreifels, Jeremy; Dong, Cao; Jinan, Wang; Jitian, Wang; Larsen, Steiner
  8. Fast-Falling Barriers and Growing Concentration: The Emergence of a Private Economy in China By Sean Dougherty; Richard Herd
  9. Les enseignements de la privatisation du secteur pétrolier russe By Catherine Locatelli
  10. Financial structure and the transmission of monetary shocks: preliminary evidence for the Czech Republic, Hungary and Poland By Alessio Anzuini; Aviram Levy
  11. Rebalancing Growth in China: A Three-Handed Approach By Blanchard, Olivier J; Giavazzi, Francesco
  12. Deflationary Expansion: an Overshooting Perspective to the Recent Business Cycle in China By Gang Gong; Justin Yifu Lin
  13. Nonfarm activity and rural income inequality : a case study of two provinces in China By Luo, Xubei; Zhu, Nong
  14. Trade, Poverty and Employment: The Social Consequences of Integration with China By Lucio Castro; Daniel Saslavsky
  15. Fiscal Decentralization and Local Public Good Provision in China By Xin-Qiao; Jie Bai
  16. Foreign Direct Investment in China's Power Sector: Trends, Benefits and Barriers By Blackman, Allen; Wu, Xun
  17. Environmental Management in the Russian Federation: A Next Generation Enigma By Wernstedt, Kris
  18. Total Factor Productivity and the Mongolian Transition By Antonio G. Chessa; Marije C. Schouwstra
  19. Di Bao : a guaranteed minimum income in urban China? By Wang, Youjuan; Ravallion, Martin; Chen, Shaohua
  20. Asymmetric Fuel Pricing in Transition Economies: The Case of Moscow By Bakytzhanova Zhuldyz
  21. Labour Protection in China: Challenges Facing Labour Offices and Social Insurance By Anders Reutersward
  22. Environmental Remediation and Economies in Transition By Boyd, James
  23. Links between the Indian, U.S. and Chinese Stock Markets By Heng Chen; Bento J. Lobo; Wing-Keung Wong
  24. The Vanishing Barter Economy in Russia: A Test of the Virtual Economy Hypothesis? Reply to Barry Ickes By Marin, Dalia
  25. Impediments to Employment and Enterprise Diversification: evidence from small-scale farms in Poland By Hannah Chaplin; Sophia Davidova; Matthew Gorton
  26. Estimating the immediate impact of monetary policy shocks on the exchange rate and other asset prices in Hungary By András Rezessy
  27. L'intégration internationale des industries chinoises de l'énergie et ses conséquences géopolitiques By Catherine Locatelli
  28. Oil and Water Don't Mix: Risk on Tap in Western Siberia By Wernstedt, Kris
  29. Potential Output Estimations for Hungary: A Survey of Different Approaches By Szilárd Benk; Zoltán M. Jakab; Gábor Vadas
  30. Financial Globalization, Corporate Governance, and Eastern Europe By Rene M. Stulz
  31. Hope springs eternal… French bondholders and the Soviet Repudiation (1915-1919) By John Landon-Lane; Kim Oosterlinck
  32. L'intensité énergétique de la croissance chinoise : tendances et enjeux By Julien Allaire
  33. The sustainability of the Hungarian pension system: a reassessment By Gábor Orbán; Dániel Palotai
  34. The Long Run Impact of Bombing Vietnam By Edward Miguel; Gerard Roland
  35. Differentiated technological regimes and changing industrial organisation: Theory and evidence from the upstream oil and gas industry By Marc Isabelle
  36. Estimating the Effect of Hungarian Monetary Policy within a Structural VAR Framework By Balázs Vonnák
  37. Exchange Rate Smoothing in Hungary By Péter Karádi

  1. By: J. David Brown (Heriot-Watt University and CEU Labor Project); John S. Earle (W.E. Upjohn Institute for Employment Research and Central European University); Almos Telegdy (Central European University and Institute of Economics of the Hungarian Academy of Sciences)
    Abstract: We analyze the effects of privatization on firm-level wages and employment in four transition economies. Contrary to workers' fears, our fixed effect and random trend estimates imply little effect of domestic privatization, except for a slight negative effect in Russia, and they provide some evidence of positive foreign effects on both wages and employment in all four countries. The negligible employment impact of domestic privatization results from effects on efficiency and scale that are large, positive, but offsetting in Hungary and Romania, and from small effects of both types in Russia and Ukraine. The positive employment and wage bill consequences of foreign ownership result from a substantial scale-expansion effect that dominates the efficiency effect.
    Keywords: privatization, employment, wages, foreign ownership, Hungary, Romania, Russia, Ukraine
    JEL: D21 G34 J23 J31 L33 P31
    Date: 2005–11
  2. By: Nabeshima, Kaoru; Yusuf, Shahid
    Abstract: Since the early 1980s, China has begun gradually integrating with the global system. In doing so the country has moved toward its own unique brand of market socialism, which recognizes private ownership, and is adopting market institutions and pursuing industrial change within the framework of an urban economic environment. The process of transition has now permeated every corner of Chinese life and no organization has been left untouched. Yet industrial organization in China-especially in the state sector-has been slow to shed many of the distinctive structural characteristics of the old line Maoist era state enterprises. The main prong of the industrial strategy in support of urban change is ownership reform that transforms state-owned enterprises into corporate entities with majority state ownership or places them wholly in private hands, in the process also bolstering the incentives for and the dynamism of the private sector. While the central government spearheads the ownership reform initiative, in the majority of cases the actual implementation is in the hands of municipal, county, and prefectural governments that must coordinate their efforts with other factors influencing urban changes. This paper situates industrial change in China within the context of urban development and examines the interplay of broad reform strategy with local implementation, and its actual practice by the reformed firms.
    Keywords: Municipal Financial Management,Private Participation in Infrastructure,Economic Theory & Research,State Owned Enterprise Reform,Microfinance
    Date: 2006–01–01
  3. By: Zhu, Z.; Krug, B. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: China like other transition economies needs to establish a tax system compatible with a market economy, in particular, an efficient tax administration system with capable tax bureaucrats. The paper singles out the general and China-specific features by which central government attempts to accompany economic transformation via tax farming to tax bureaucratisation in tax administration. Based on empirical study in two provinces this paper shows that without including local government agencies and their budgets, China?s fiscal federalism cannot be analysed and argues that China?s emerging tax system depends on the institutional and organizational design that shapes the interaction between central government, local governments and economic agents.
    Keywords: Tax Governance;Tax Farming;Tax Bureaucratisation;Fiscal Federalism;
    Date: 2005–12–21
  4. By: Bartosz Mackowiak
    Abstract: We decompose by origin the sources of the variation in real aggregate output and aggregate price level in the Czech Republic, Hungary and Poland. We find that a sizable fraction of the variation is attributable to external shocks, especially so for aggregate price level. We show that euroarea interest rate shocks can account for a significant fraction of the external spillover effects. We conclude that theoretical models of advanced transition economies and policy rules for these economies should feature a prominent role for external shocks.
    Keywords: Vector autoregression, Granger causal priority, transition economies, external shocks
    JEL: F41 E3 O11 P2
    Date: 2005–10
  5. By: Takao Kato (Colgate University, Columbia University and IZA Bonn); Cheryl Long (Colgate University, Stanford University and University of Electronic Science and Technology of China)
    Abstract: Using comprehensive financial and accounting data on China’s listed firms from 1998 to 2002, augmented by unique data on CEO turnover, ownership structure and board characteristics, we estimate Logit models of CEO turnover. We find consistently for all performance measures including both stock return and various accounting measures that: (i) overall, CEO turnover is significantly and inversely related to firm performance though the magnitude of the relationship is modest; (ii) CEO turnover-performance link is stronger when the percentage of company shares owned by the largest shareholder is larger. Furthermore, insofar as stock performance is concerned, (iii) turnover-performance link is found to be weaker for listed firms still controlled by the state; (iv) the appointment of independent directors enhances turnover-performance link; (v) the listing suspension mechanism, i.e., the ST designation, adopted by China’s securities regulatory agency appears to be effective in improving turnover-performance tie; and (vi) listed firms with CEOs holding additional positions in the controlling shareholders have weaker turnover-performance link. Consistent with the "law and finance" approach to corporate governance and the literature on economic transition, our findings suggest that any fundamental improvement in China’s corporate governance will require a broad program that encompasses not only privatization but also laws and their effective implementation to provide better protection for investors.
    Keywords: executive turnover, firm performance, enterprise reform, corporate governance, ownership structure, China, and transition economies
    JEL: M52 M12 J33 P34 G30 O16 O53 G30 G15
    Date: 2006–01
  6. By: Dani Rodrik
    Abstract: Much more than comparative advantage and free markets have been at play in shaping China's export success. Government policies have helped nurture domestic capabilities in consumer electronics and other advanced areas that would most likely not have developed in their absence. As a result, China has ended up with an export basket that is significantly more sophisticated than what would be normally expected for a country at its income level. This has been an important determinant of China's rapid growth. What matters for China's future growth is not the volume of exports, but whether China will continue to latch on to higher-income products over time.
    JEL: F1 O4
    Date: 2006–01
  7. By: Krupnick, Alan (Resources For the Future); Bell, Ruth (Resources For the Future); Morgenstern, Richard (Resources For the Future); Anderson, Robert; Abegunawardena, Piya; Schreifels, Jeremy; Dong, Cao; Jinan, Wang; Jitian, Wang; Larsen, Steiner
  8. By: Sean Dougherty; Richard Herd
    Abstract: This paper assesses the progress of China’s transition toward a market economy by examining the structure of ownership, productivity, and profitability, as well as the concentration of production across firms, industries and regions. It does this by analyzing a database of firm microdata of the quarter of a million industrial companies in operation during the 1998–2003 period. Results show that the private sector now accounts for more than half of industrial output, compared with barely more than a quarter in 1998, and operates much more efficiently than the public sector. Higher productivity has fed through to profitability, motivating greater regional specialization of production. These changes are consistent with what would be expected in a market-based economy, and suggests that reforms are making rapid progress. This Working Paper relates to the 2005 OECD Economic Survey of China ( <P>La chute rapide des barrières et la concentration croissante de l’activité économique Ce document examine les progrès réalisés par la Chine dans la transition vers une économie de marché en étudiant plus particulièrement la structure de la propriété, la productivité et la rentabilité, ainsi que la concentration de la production à l'échelle des entreprises, des secteurs d'activité et des régions. Pour cela, il analyse une base de microdonnées portant sur 250 000 entreprises industrielles qui étaient en activité au cours de la période 1998-2003. Les résultats montrent que le secteur privé représente désormais plus de la moitié de la production industrielle, contre à peine plus d'un quart en 1998, et qu'il est bien plus efficace que le secteur public. Par ailleurs, l'accroissement de la productivité et ses effets positifs sur la rentabilité de l'activité économique ont entraîné une plus grande spécialisation régionale de la production. Ces évolutions, conformes à ce que l'on peut attendre dans une économie fondée sur le jeu du marché, sont sans doute le signe que les réformes progressent rapidement. Ce Document de travail se rapporte à l'Étude économique de l'OCDE de la Chine, 2005 (
    Keywords: productivity, productivité, transition, transition, restructuring, restructuration, private sector, secteur privé, firm microdata, micro-données d'entreprise, regional concentration, concentration régionale, market economy, économie de marché
    JEL: D4 F15 L11 O12 P23
    Date: 2005–12–16
  9. By: Catherine Locatelli (LEPII - Laboratoire d'économie de la production et de l'intégration internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II)
    Abstract: L'analyse des conséquences inattendues de la privatisation d'un secteur de rente, l'industrie pétrolière, en Russie.
    Keywords: industrie pétrolière;Russie;rente;privatisation
    Date: 2006–01–12
  10. By: Alessio Anzuini (Banca d'Italia); Aviram Levy (Banca d'Italia)
    Abstract: The paper analyses the financial structure of the private sector in the Czech Republic, Hungary and Poland and assesses its implications for the monetary transmission mechanism. The financial accounts of these countries provide a picture of a private sector which is predictably financially less mature than the EU average: the corporate sector relies significantly on non-market financial liabilities (such as trade credits and non-traded shares) and bears a substantial exchange rate risk; the household sector is less sophisticated both in terms of financial assets, whose composition is tilted towards bank deposits, and liabilities, the volume of which is still negligible. VAR system estimates conducted separately on each acceding country suggest that, despite the inferior financial development of these countries, the co-movement of macroeconomic variables conditional on a monetary policy shock is similar across countries and not dissimilar to what is found in the more advanced economies.
    Keywords: Financial structure, identified VAR, monetary policy shock, price puzzle.
    JEL: C30 E44 E52 F41
    Date: 2004–07
  11. By: Blanchard, Olivier J; Giavazzi, Francesco
    Abstract: Our paper is an attempt to define the contours of the right macroeconomic strategy for China. In a nutshell, we believe that the package includes a decrease in saving, with a focus on private saving, an increase in the supply of services, in particular health services, and an appreciation of the RMB. This is why we refer to this strategy as a 'three-handed approach': action on the fiscal and budgetary front, accompanied by currency revaluation. We start by asking how the Chinese economy got to where it is - what the strategy has been since the beginning of the reforms, and what the main characteristics of the economy are today. We then ask what is the desirable path for the future, and which are the main policy tradeoffs implied by such a path. Finally, we put the various pieces together to describe what we believe is a consistent policy package.
    Keywords: China; economic development; international economics
    JEL: E2 O53
    Date: 2005–12
  12. By: Gang Gong (School of Economics and Managment, Tsinghua University); Justin Yifu Lin (China Center of Economic Research, Peking University)
    Abstract: Deflationary expansion has puzzled economists both in and outside China. We study this business cycles phenomenon within a model of discrete time dynamics. We find that deflationary expansion could be possible if driven by an overshooting in investment and if the state of the economy maintains high rate of growth. This expression is consistent with the recent time series variation of some key macroeconomic variables. The high steady state of growth could be explained by the current insttutional environment of China.
    Keywords: Deflationary Expansion, Overshooting , Business Cycle, China, growth, discrete time dynamics
    JEL: C62 E32 E50 P24
    Date: 2005–11
  13. By: Luo, Xubei; Zhu, Nong
    Abstract: Nonfarm activity plays an increasingly important role in rural household income. Based on data from the Living Standards Measurement Study in the provinces of Hebei and Liaoning, the authors study the distribution of nonfarm income in rural China. First, they assume nonfarm income as an exogenous transfer to total income to decompose the Gini index. Second, they assume nonfarm income as a potential substitute for farm income to take household choices into account and simulate household income. The results show that nonfarm activity reduces rural income inequality by raising the income of poor households to a larger extent than that of rich households. Improving rural infrastructure and implementing universal basic education are critical to build up the capacity of households (in particular, poor households) to participate in nonfarm activity. Strengthening the links between farm activity and nonfarm activity is essential to optimize the contribution of nonfarm activity to pro-poor rural economic development.
    Keywords: Rural Poverty Reduction,Poverty Monitoring & Analysis,Services & Transfers to Poor,Poverty Diagnostics,Inequality
    Date: 2006–01–01
  14. By: Lucio Castro (Maxwell Stamp PLC); Daniel Saslavsky (Inter American Development Bank)
    Abstract: This paper estimates the potential effects of a free trade agreement (FTA) between China and Mercosur on poverty, income distribution, welfare and employment. The case of Argentina, in particular, is investigated. To this end, partial equilibrium techniques are combined with micro econometric methodologies employing data from household surveys to examine the likely effects of an FTA with China on poverty and income distribution. We find that the FTA would result in a small reduction in poverty as well as an improvement in the income distribution. Highly disaggregated data at the industry level is used for the first time to estimate labor demand-output and wage elasticities in order to estimate the effects of an agreement with China on sectoral and aggregate employment rates. According to this, trade with the PRC did not have a significant effect on industrial employment, even in a period of swift trade liberalization like the nineties.
    Keywords: China, Import Competition, Trade and Labor Market Interactions, Employment, Income Distribution, Poverty
    JEL: F14 F15 F16 F17 L60
    Date: 2005–12–28
  15. By: Xin-Qiao (China Center of Economic Research, Peking University); Jie Bai (China Center of Economic Research, Peking University)
    Abstract: Fiscal incentive is closely related with the extra-budgetary revenues. Based on our definition of fiscal incentive, we explore the impacts of fiscal incentives under decentralization on responsiveness of public good provision to real local needs. There are also some problems in fiscal decentralization in China: first, with a huge basis of extra-budgetary revenue, the size of local government would be expanded, resulting in a heavier burden on the shoulder of local citizens and peasants; second, there exist some decreasing return to scale in local extra-budgetary expenditure; thirdly, ¡°urbanization¡± (measured as the ratio of rural population to the total population) is negatively correlated with the local extra-budgetary expenditure on urban maintenance, indicating that in China, the process of industrialization and urban construction are not consistent.
    Keywords: Fiscal Decentralization, Local Public Good Provision, Fiscal Incentives
    JEL: H61 H71 H72
    Date: 2005–06
  16. By: Blackman, Allen (Resources For the Future); Wu, Xun
    Abstract: In the early 1990s, hoping to reduce chronic electricity shortages and enhance the efficiency of Chinese power plants, China opened its doors to foreign direct investment (FDI) in electricity generation. Using data from an original survey of US private investors, official Chinese statistics, and other sources, we assess the volume and characteristics of FDI in China's power sector, its impact on energy efficiency, and the factors that limit this impact. Our five principal findings are as follows. First, the volume FDI in China's power sector will likely fall short of the government's 1995 - 2000 capacity expansion target by a substantial margin, most likely because of persistent institutional barriers to FDI. Second, to avoid the lengthy central government approval process for large plants and to minimize risk, early FDI tended to be in small-scale, gas- and oil-fired plants using imported equipment and located in coastal provinces. However, more recent FDI tends to be in larger coal-fired plants that use more Chinese equipment and tends to be located in the north as well as the east. Third, and perhaps most important, FDI is likely having a significant positive impact on energy efficiency. Almost a third of the 20 FDI plants in our survey sample use advanced efficiency-enhancing generating technologies, and a fifth are cogeneration plants. Fourth, the main factor that has hampered the contribution of FDI to energy efficiency is an institutional bias in favor of small-scale plants which are generally not as energy efficient as the large-scale plants. And finally, the most important barriers to FDI generally are uncertainty associated with the approval process of FDI projects, electricity sector regulation, and the risk of default on power purchase contracts.
  17. By: Wernstedt, Kris (Resources For the Future)
    Abstract: Abstract Environmental managers in Russia face severe problems, both from Soviet-era and continuing environmental degradation and due to the weakness of current institutions with responsibilities for environmental protection. This paper draws on surveys, a case study of water pollution, and workshops on Russian environmental decisionmaking to explore prospects for environmental improvements. Using concepts from the regulatory reform literature on next-generation environmental policies, it focuses on the use of market incentives, the construction of a civil society, and community involvement, and emphasizes that Russian nongovernmental organizations may have a particularly important role to play in improving environmental management. Solidifying their legal base, coalition-building skills, and capability to conduct independent, pragmatic policy analyses would enhance their contribution.
    Keywords: Russia, environmental management, non-governmental organizations, water quality, Siberia, transitioning countries, next-generation environmental policies
  18. By: Antonio G. Chessa (University of Amsterdam); Marije C. Schouwstra (University of Amsterdam)
    Abstract: Total Factor Productivity (TFP)is often used on the macro-economic level as an indicator of changes in efficiency of a country. In many transition economies TFP is seen to have been negative the last decade of the plan economy and starts increasing and become positive after a (quite a) few years of transition. Many authors conclude that this is a gain in efficiency due to the structural changes –such as privatisation and liberalisation – carried out in order to establish a market economy in those countries. In the case of Mongolia, not only non-viable enterprises closed down, but many possibly viable enterprises with potential closed down as well. This raises the question whether changes in TFP were really attributable to increases in efficiency. To investigate this, the mathematical properties of TFP are analysed in order to generate new insights into the development of TFP in Mongolia. Simulations are performed to see what happens with TFP if not the le! ast efficient, but a certain percentage of enterprises in a (closed) economy randomly close down. The robustness of Total Factor Productivity of Mongolia was tested not only for errors in all estimated values but also for measurement errors in the data. It was concluded that in many commonly occurring cases it is not necessary to estimate alpha; that a random closure of enterprises fits the data of Mongolia much more closely than closing only the least efficient enterprises; and that measurement errors in the data influence the estimated TFP significantly.
    Keywords: transition; development; TFP; total factor productivity; Mongolia; measurement errors; simulation; Cobb-Douglas production function; sensitivity analysis; efficiency
    JEL: O C15 E2 P2
    Date: 2005–09–22
  19. By: Wang, Youjuan; Ravallion, Martin; Chen, Shaohua
    Abstract: Concerns about incentives and targeting naturally arise when cash transfers are used to fight poverty. The authors address these concerns in the context of China ' s Di Bao program, which uses means-tested transfers to try to assure that no registered urban resident has an income below a stipulated poverty line. There is little sign in the data of poverty traps due to high benefit withdrawal rates. Targeting performance is excellent by various measures. Di Bao appears to be better targeted than any other program in the developing world. However, all but one measure of targeting performance is found to be uninformative, or even deceptive, about impacts on poverty. The authors find that the majority of the poor are not receiving help, even with a generous allowance for measurement errors. While on paper, Di Bao would eliminate urban poverty, it falls well short of that ideal in practice.
    Keywords: Services & Transfers to Poor,Poverty Monitoring & Analysis,Poverty Impact Evaluation,Inequality,Poverty Diagnostics
    Date: 2006–01–01
  20. By: Bakytzhanova Zhuldyz
    Abstract: Empirical studies (Bacon, 1991; Peltzman, 2000) show that output prices tend to respond faster to input price increases than to decreases. This paper finds out such asymmetry in the fuel market of Moscow and analyzes the influence of companies' and market characteristics on asymmetric response. The conclusion is that different mechanisms of the phenomenon, including tacit collusion and consumer search, probably coexist in the Moscow retail gasoline market.
    Keywords: Russia, Kazakhstan, market concentration, gasoline, asymmetric response
    JEL: C23 L11 L13 L81
    Date: 2005–12–29
  21. By: Anders Reutersward
    Abstract: One of the key institutional outcomes of China’s economic reforms has been to create a new role for employers that is separate from the state, and allows enterprises to concentrate on their business. To protect workers, the government has set up public institutions for many social and administrative functions that until recently pertained to work units (danwei), or did not exist. This paper focuses on three such functions for which the 1994 Labour Law makes the government responsible: employment services, labour inspection and social insurance. Un des résultats institutionnels clés des réformes économiques en Chine a été la promotion du nouveau rôle joué par les employeurs, en dehors de l’Etat, qui permet aux entreprises de gérer leurs propres affaires. Le gouvernement, pour protéger les travailleurs, a créé des institutions publiques couvrant de nombreuses fonctions sociales et administratives qui, jusqu’à une date récente, ne concernaient que les unités de travail (danwei) ou n’existaient pas. Ce document se concentre sur trois des fonctions que la Loi de 1994 sur le travail place sous la responsabilité du gouvernement : les services de l’emploi, l’inspection du travail et l’assurance sociale.
    JEL: J2 J42 J52 J6 J8
    Date: 2005–11–07
  22. By: Boyd, James (Resources For the Future)
    Abstract: The paper discusses the design of environmental remediation laws in countries struggling with fundamental market and institutional reforms. Optimal cleanup standards, liability rules, and enforcement are discussed from the standpoint of both economic efficiency and practical implementation. Particular attention is paid to financing mechanisms and issues that arise during privatization.
  23. By: Heng Chen (Department of Economics, National University of Singapore); Bento J. Lobo (University of Tennessee at Chattanooga); Wing-Keung Wong (Department of Economics, National University of Singapore)
    Abstract: This study examines the bilateral relations between three pairs of stock markets, namely India-U.S., India-China and China-U.S. We use a Fractionally Integrated Vector Error Correction Model (FIVECM) to examine the cointegration mechanism between markets. By augmenting the FIVECM with a multivariate GARCH formulation, we study the first and second moment spillover effects simultaneously. Our empirical results show that all three pairs of stock markets are fractionally cointegrated. The U.S. stock market plays a dominant role in the relations with the other two markets, whereas there is an interactive relationship between the Indian and Chinese stock markets. In particular, the Indian stock market dominates the first moment feedback with the Chinese market, while the latter dominates the second moment feedback with the former.
    Keywords: Stock market, Cointegration, Fractionally Integrated Vector Error Correction Model, Multivariate GARCH
  24. By: Marin, Dalia
    Abstract: This paper is a reply to Barry Ickes' critique of my paper ?Trust versus Illusion: What is Driving Demonetization in Russia?? in which I show that the data reject Barry Ickes' Virtual Economy explanation of barter in Russia in favor of an institutional explanation based on the lack of trust.
    JEL: P30 O10 G30 D20
    Date: 2004–11
  25. By: Hannah Chaplin; Sophia Davidova; Matthew Gorton
    Abstract: In an environment of low returns to agricultural activities and slow structural change, both employment and enterprise diversification have been presented as possible strategies for raising the incomes of farm households. This paper focuses on the barriers to taking up off-farm employment and establishing new non-agricultural enterprises. Factor and cluster analysis are applied to a data-set of individual farms in Poland in order to identify groups of households facing similar constraints and profile policy measures that are most likely to assist diversification. The majority of non-diversifiers are unlikely to become pluriactive in the near future due to a combination of age, a desire to concentrate on farming and remoteness. Farm households that are willing to diversify are characterised by the lowest agricultural incomes. For these households, a poor endowment of human and physical capital is a major constraint.
    Keywords: Poland, diversification, off-farm employment, non-agricultural enterprises, cluster analysis
    JEL: R0 Q12
    Date: 2005–12–15
  26. By: András Rezessy (Magyar Nemzeti Bank)
    Abstract: The paper estimates the immediate impact of Hungarian monetary policy on three classes of asset prices: the exchange rate of the forint vis-à-vis the euro, spot and forward government bond yields and the index of the Budapest Stock Exchange. The endogeneity problem is treated with the method of identification through heteroskedasticity as described by Rigobon and Sack (2004). The results suggest a significant impact on the exchange rate in one day i.e. an increase in the policy rate leads to an appreciation of the domestic currency, which is in line with the classic intuition. The effect increases markedly when the estimation is carried out with a two-day window suggesting the inefficiency of markets in incorporating monetary policy decisions in asset prices in a short period of time. Monetary policy affects spot yields positively, but the effect gradually dies out as the horizon gets longer. This can be explained with the impact on forward yields, as the results suggest a positive impact on short-term and a negative impact on long-term forward yields meaning that a surprise change in the policy rate leads to a rotation of the forward curve. The method does not provide interpretable and significant results for the stock exchange index.
    Keywords: Monetary transmission mechanism, Asset prices, Exchange rate, Yield curve, Stock market, Identification, Heteroskedasticity.
    JEL: E44 E52
    Date: 2005
  27. By: Catherine Locatelli (LEPII - Laboratoire d'économie de la production et de l'intégration internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Depuis le début des années 2000, la Chine a fait une irruption majeure sur les marchés énergétiques internationaux, en particulier sur celui du pétrole. Cette croissance de la dépendance extérieure de la Chine dont la politique énergétique s'est longtemps caractérisée par des stratégies d'autosuffisance est porteur d'enjeux économiques et géopolitiques nouveaux. L'objectif de cet article est en particulier d'analyser les politiques que ce pays tente de mettre en place pour faire face à cette nouvelle donne énergétique.
    Keywords: Chine;marché énergétique international;industrie énergétique;géopolitique
    Date: 2006–01–12
  28. By: Wernstedt, Kris (Resources For the Future)
    Abstract: In common with other areas throughout the Russian Federation, western Siberia faces formidable environmental pollution, a problem that in part is the legacy of the highly centralized Soviet era when meeting production quotas was the raison d'être for many managers of economic enterprises. In this region, over the last thirty years the near singular focus on short term oil production has led to severe contamination of the area's surface and groundwater supplies, threatening both human and ecological health. At the same time, revenues from continued oil extraction may provide the means to address some of the environmental problems. In light of the struggling economy and potential political instability, however, it is particularly critical that authorities prioritize environmental investments, as well as cultivate public support for such investments. This paper reports on a recent investigation of this problem by a team of American and Russian scientists, under the sponsorship of the U.S. National Research Council, U.S. National Academy of Sciences, and the Russian Academy of Sciences. The chief recommendation from that investigation is that the region develop an environmental program based on human health risk assessment and management.
  29. By: Szilárd Benk (Magyar Nemzeti Bank); Zoltán M. Jakab (Magyar Nemzeti Bank); Gábor Vadas (Magyar Nemzeti Bank)
    Abstract: This paper is a comprehensive analysis of Hungary’s potential output. Since the concept of potential output is not unique, we present various interpretations of potential GDP, along with a large set of techniques for estimating it. Various estimates are presented and robustness analyses are performed. Finally, an illustrative scenario is outlined for the forthcoming few years.
    Keywords: potential output, output gap, production function, business cycle, filtering.
    JEL: E32 C22 C32
    Date: 2005
  30. By: Rene M. Stulz
    Abstract: For many countries, the most significant barriers to trade in financial assets have been knocked down. Yet, the financial world is not flat because poor governance prevents firms from being widely held and from taking full advantage of financial globalization. Poor governance has implications for corporate finance as well as for macroeconomics. I show that poor governance in Eastern Europe is accompanied, as expected, by high corporate ownership concentration, low firm valuation, poor financial development, and low foreign participation.
    JEL: G11 G15 G32 F30
    Date: 2006–01
  31. By: John Landon-Lane (Rutgers University); Kim Oosterlinck (Université Libre de Bruxelles)
    Abstract: By their extreme nature, repudiations rarely occur. History is therefore crucial to analyze their impact on bond prices. This paper provides an empirical study based on an original database: prices of a Tsarist bond traded in Paris before and after its repudiation by the Soviets. A structural vector autoregression is used to identify shocks to this bond that are orthogonal to shocks hitting a proxy for the Paris bond market, the French 3% rente. French market shocks are thus disentangled from repudiation specific shocks hitting the Russian bond. Consistent with expectations no major Russian shocks appears before the 1917 revolution. For 1918, shocks are mainly related with bailouts or hopes of partial bailouts. In 1919, however, the nature of shocks changes as they can be explained either by the negotiations with the Soviets or by the fate of the White Armies. In view of these elements, we argue that the bonds’ value were subject to a “Peso problem”. Their prices essentially reflected expected extreme events that never took place.
    Keywords: repudiation; sovereign debt;
    JEL: F34 G1 N24
    Date: 2005–11–16
  32. By: Julien Allaire (LEPII - Laboratoire d'économie de la production et de l'intégration internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II)
    Abstract: La Chine a connu récemment une hausse de son intensité énergétique après 20 ans de baisse constante. Nous revenons sur les causes de cette évolution en nous intéressant principalement à deux périodes récentes : la période de croissance lente entre 1997 et 2001 qui a connu une baisse de la consommation primaire d'énergie et la période de croissance rapide en cours depuis 2002 qui a conduit à une hausse de l'intensité énergétique. Nous nous intéressons à l'industrie lourde qui explique la majeure partie de cette inversion de tendance et au développement des nouvelles capacités de production dans les secteurs les plus consommateurs d'énergie pour répondre à l'industrialisation et l'urbanisation du pays. On attire ici le lecteur sur le lien entre « localisme » et intensité énergétique.
    Keywords: Chine;intensité énergétique;croissance économique;développement industriel
    Date: 2006–01–19
  33. By: Gábor Orbán (Magyar Nemzeti Bank); Dániel Palotai (Magyar Nemzeti Bank)
    Abstract: This paper gives a reassessment of the sustainability of the reformed Hungarian pension system with a special focus on whether the introduction of the fully funded pillar in 1998 has led to any improvement in the sustainability of the pension system. After a brief description of the 1997/1998 reform of the Hungarian pension system, we present results from simulations with a revised pension model. Our results show that 1) the pension system, in its present form, is unsustainable with net implicit public liabilities in the system around 240% of GDP, unless corrective measures are taken. 2) The series of policy measures taken since the 1997/1998 reform account for nearly three-fourths of the net liability implicit in the pension system, reflecting a policy reversal: an alarming tendency of undoing the progress made by the reform in terms of improving the system’s sustainability. 3) The funded pillar can help in lowering net implicit liabilities if the transition costs involved in the reform are financed by budgetary adjustment. 4) The returns recorded so far in the private pension funds fall short of expectations and, on the condition that these low returns persist, the second pillar is projected to provide annuities that do not make up for the reduction in benefits received from the public pillar. This conclusion is valid even if we compare a hypothetical balanced full pay-as-you-go (PAYG) system with a sustainable multi-pillar system.
    Keywords: ageing, pension system, social security, fiscal sustainability.
    JEL: G23 H55
    Date: 2005
  34. By: Edward Miguel; Gerard Roland
    Abstract: We investigate the impact of U.S. bombing on later economic development in Vietnam. The Vietnam War featured the most intense bombing campaign in military history and had massive humanitarian costs. We use a unique U.S. military dataset containing bombing intensity at the district level (N=584). We compare the heavily bombed districts to other districts controlling for baseline demographic characteristics and district geographic factors, and use an instrumental variable approach exploiting distance to the 17th parallel demilitarized zone. U.S. bombing does not have a robust negative impact on poverty rates, consumption levels, infrastructure, literacy or population density through 2002. This finding suggests that local recovery from war damage can be rapid under certain conditions, although further work is needed to establish the generality of the finding in other settings.
    JEL: E2 O5 P5 H7
    Date: 2006–01
  35. By: Marc Isabelle (IMRI (Institut pour le Management de la Recherche et de l’Innovation), Université Paris-Dauphine)
    Abstract: The upstream oil and gas industry has experienced two different technological regimes since it became international in the 1920s. Whereas its incentives to innovate remained weak during the first fifty years, new technical challenges from the 1970s onward forced the industry into a real technological revolution, further amplified by fierce competitive pressure on hydrocarbon prices since the oil price collapse in 1986. The paper shows that performing this technological acceleration has entailed deep structural changes in the relationships between international oil and gas companies in terms of an increasing propensity to cooperate, more balanced partnerships and a more selective choice of partners.
    Keywords: oil & gas industry, industrial organisation, technological innovation, cooperation
    JEL: L71 D2 L2 O3
    Date: 2001–04
  36. By: Balázs Vonnák (Magyar Nemzeti Bank)
    Abstract: A standard approach in measuring the effect of monetary policy on output and prices is to estimate a VAR model, characterise somehow the monetary policy shock and then plot impulse responses. In this paper I attempt to do this exercise with Hungarian data. I compare two identification approaches. One of them involves the ‘sign restrictions on impulse responses’ strategy applied recently by several authors. I also propose another approach, namely, imposing restrictions on implied shock history. My argument is that in certain cases, especially in the case of the Hungarian economy, the latter identification scheme may be more credible. In order to obtain robust results I use two datasets. To tackle possible structural breaks I make alternative estimates on a shorter sample as well. The main conclusions are the followings: (1) although the two identification approaches produced very similar results, imposing restrictions on history may help to dampen counterintuitive reaction of prices; (2) after 1995 a typical unanticipated monetary policy contraction (a roughly 25 basis points rate hike) resulted in an immediate 1 per cent appreciation of the nominal exchange rate (3) followed by a 0.3% lower output and 0.1-0.15% lower consumer prices; (4) the impact on prices is slower than on output; it reaches its bottom 4-6 years after the shock, resembling the intuitive choreography of sticky-price models; (5) using additional observations prior to 1995 makes identification more difficult indicating the presence of a marked structural break.
    Keywords: structural VAR, monetary transmission mechanism, identification, sign restriction, monetary policy shocks
    JEL: C11 C32 E52
    Date: 2005
  37. By: Péter Karádi (New York University, USA)
    Abstract: The paper proposes a structural empirical model capable of examining exchange rate smoothing in the small, open economy of Hungary. The framework assumes the existence of an unobserved and changing implicit exchange rate target. The central bank is assumed to use interest rate policy to obtain this preferred rate in the medium term, while market participants are assumed to form rational expectations about this target and influence exchange rates accordingly. The paper applies unobserved variable method – Kalman filtering – to estimate this implicit exchange rate target, and simultaneously estimate an interest rate rule and an exchange rate equation consistent with this target. The results provide evidence for exchange rate smoothing in Hungary by providing an estimated smooth implicit exchange rate target development and by showing significant interest rate response to the deviation of the exchange rate from this target. The method also provides estimates for the ceteris paribus exchange rate effects of expected and unexpected interest rate changes.
    Keywords: exchange rate smoothing, interest rate rules, Kalman filter
    JEL: E52 F31 F41
    Date: 2005

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